Investment Technology Group (ITG), a U.S. stock broker, paid a $20.3 million fine for running a secret operation named Project Omega to take advantage of “dark pools” trading orders made by its clients. Experts say that Barclays and Credit Suisse may also soon pay fines for dark pools trading scams.

Most traders buy and sell stocks on public stock exchanges – but “dark pools” are essentially private stock markets located inside big banks that allow clients to place secret orders. Such systems have been in existence for 30 years and have become increasingly popular among institutional buyers who want to hide their identity or ensure that a large order does not cause the price to fluctuate. There are 45 such registered dark pools which now constitute as much as 40 percent of overall stock market trading in the U.S., according to the Tabb Group, a market research firm.

The biggest dark pools are CrossFinder which is run by Credit Suisse of Switzerland and Liquidity Cross (LX) which is run by Barclays of the UK. Union Bank of Switzerland also runs a dark pool called Price Improvement Network Alternative Trading System (PIN ATS), Societe Generale of France has one named AlphaY while ITG runs a system called Posit.

What ITG did was to spy on its clients trading in Posit and try to make money off them before the purchases were executed. Under a secret scheme code-named "Project Omega" the company created a special desk to secretly trade 262 million shares against its own clients between April 2010 and July 2011. “ITG misused highly confidential customer order and trading information for its own benefit,” said Andrew Ceresney, the director of the enforcement division of the U.S. Securities and Exchange Commission. “The conduct here was egregious.”

Wall Street Journal sources have told the newspaper that Barclays and Credit Suisse banks are also likely to agree to pay U.S. regulators tens of millions of dollars in coming weeks to settle investigations into dark pools trading.

In the lawsuit, the attorney general cited an internal email in which an unnamed Barclays executive told another: “I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree.”

Barclays has counter-sued but in April U.S. District Judge Shira Scheindlin rejected most of the bank’s arguments. “As alleged, the specific misstatements about LX — which include touting its safety while secretly encouraging predatory behavior — call into question the integrity of the company as a whole,” Scheindlin wrote.

Despite the investigations, traders say that they are not going to stop using dark pools. “Investors believe there is value to trading in the dark,” Alex Green, a former head trader at hedge funds, told the Wall Street Journal. “The regulators are exposing some of the things that have gone on, but there will still be a demand to trade in dark pools.”

Wall Street watchers say that none of this conduct is particularly unusual. “The financial industry is … built on the dream of making money for nothing, of arbitrage, of perpetual motion machines, of converting intellect into cash without the annoying interventions of hard work and risk,” writes Mark Levine of Bloomberg. “Magical sure-fire ways to make money tend to be, you know, bad, for the people providing the sure-fire money. Regulators keep making them illegal. But the regulations are complicated, so people keep reinventing the same magical ways to make money.”